Viewing Expert

Michael Underhill , Portfolio Manager, Exempler Funds

Capital Innovations

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Markets. Real assets such as Agriculture, Real Estate, Collectibles, Commodities, and infrastructure are at their cheapest relative to financial assets since the late 1920s. When you look at some of the metrics on some of these you see monetary policy. They prop up financial assets. Emerging market real estate is really quite cheap. Depending upon the type of real estate, there are different kinds of metrics. Student housing, for example, looks cheap in Latin America but in the US it looks expensive. People are going into Britain and buying real estate. Companies that export outside of the UK are doing quite well.

Investing in US Companies. Short term currency risks are the fastest way to lose money. Be very careful round currency risk. There is more currency risk and uncertainty to come. Look for a fund that manages currency risk for you.

Favourite commodity recommendation with stability 5 years plus. There is decreasing supply of trees worldwide and increasing demand. Timber should appreciate 6% over the next 30 years. You need to increase exposure as you see supply coming off line and decrease as demand comes on line.

They returned debt earlier this year. Cost profitability has goes up and you will see better margins when they report later this week. The uncertainty with US elections and dollar, gold will come back into favour.

AGU-T vs. ADM-N. AGU-T has the merger firmly baked into the stock. ADM-T is well positioned with good commodity exposure and from here has a good 15-20% upside in the stock. They don’t use opportunistic hedges but have a commodities trading desk and lock in some of their contracts.

AGU-T vs. POT-T. How much are the stocks going to be worth after the merger? A lot of the value has been squeezed out of the play. POT-T is more of a deep value play. POT-T will give you a little bit better yield and is his preferred.

AGU-T vs. ADM-N. AGU-T has the merger firmly baked into the stock. ADM-T is well positioned with good commodity exposure and from here has a good 15-20% upside in the stock. They don’t use opportunistic hedges, but have a commodities trading desk and lock in some of their contracts.

If you are looking for a company in the design and engineering space, this one can benefit. They have not experienced the benefit in the last 3 to 5 years. You could look at utilities in the shorter term. It is one of the leading companies out there and there is nothing questionable about the balance sheet. It is not the top idea in the portfolio, however.

(Top Pick Jul 2/14, Down 21.54%)You look at the correction in oil hitting harder than expected and then you look at the yield and the outlook for energy. This would be a good value play where you get paid to wait.

It has not been without its volatility. They deleveraged in Jan/Feb this year. They continued deleveraging and if you look at them now they are one of the more unique global diversified resource plays. They are trying to conserve cash, pay off debt and sell non-core assets.

It is an infrastructure spending play. If you took a profit at this juncture you may be a bit early. The planning phase takes years for one of these projects. Infrastructure spending comes from fiscal stimulus. There is going to be more infrastructure spending and more projects. There will be a longer term need for these companies. This stock has troughed out, but you could make more in the future.

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